The U.K.’s role in the European debt crisis

Marketplace Staff Dec 2, 2010

The U.K.’s role in the European debt crisis

Marketplace Staff Dec 2, 2010


Kai Ryssdal: The Euro got a little bounce back on foreign exchange markets today. The single currency was boosted by the European Central Bank promising more support for the shaky European financial system, if — or perhaps when — needed.

Although it doesn’t use the Euro, the United Kingdom is also supporting its fellow European Union countries in trouble, in the recent Irish bailout, for instance. But even as it helps abroad, the new government in the U.K. has enforced strict cuts domestically to education and other social services.

Sir Nigel Sheinwald is the British Ambassador to the United States, he’s here with us now. Mr. Ambassador, welcome to the program.

Nigel Sheinwald: Thank you very much.

Ryssdal: With this phrase “European debt crisis” being visited upon us yet again, what’s the mood in the U.K. right now about financial stability and the global crisis in its entirety?

SHEINWALD: Well this was the backdrop to our election back in May. It’s the reason why our government said right from the start that we needed to attack our budget deficit, really is the prime plank of our economic policy. And so we’ve taken very serious steps to reduce our deficit, from about 11 percent last year to 1 percent in five years time. At the same time, you know, the situation in Ireland has gotten very serious; the U.K.’s contributed to the rescue package for Ireland. Even though we’re out of the Euro, we recognize that our interests is by supporting the Irish economy.

Ryssdal: Do you thank your lucky stars the British government that you’re not in the Euro now; you can safely stand back and say, ‘phew, missed that one a little bit’?

SHEINWALD: Absolutely. It’s a very clear committment on the part of our coalition government. They’ve agreed that there’s no prospect of the U.K. joining the Euro during the lifetime of our current Parliament, so for the next four and a half years. But we don’t look on with indifference, because we know that our economy and the exporting economy is intimately connected to the rest of Europe. The U.K. exports more to Ireland than we do to Brazil, Russia, China and India together.

Ryssdal: I wanted to ask you about the differences in the way the British government and the American government have decided to handle the fallout from the financial crisis. The British government has chosen, to much play in the press, austerity. The American government has chosen stimulus spending — the Federal Reserve just put in another $600 billion in the American economy. It’s a distinct difference.

SHEINWALD: There are some differences of course. I mean just to go back a couple of years, to the depth of the crisis, our then-government of course did choose to pump a lot of government help into the economy. Two, two and a half years on, we’ve moved out of that. The U.K. had a particular set of problems because of the severity of our budget deficit. It was the largest budget deficit in our peacetime history, and we had to deal with that. So our situations are different. We’re not a reserve currency; we don’t have the leeway that that gives the United States, we don’t have the scale of the United States’ economy to fall back on. So a medium-sized economy like the U.K. had to look after itself and we had to therefore take these severe measures.

Ryssdal: Have we collectively fixed what went wrong to let the crisis happen, or are we still trying to catch up?

SHEINWALD: I think we’re still in the process of fixing it. I think there are a number of things which have happened, both in this country and in Europe and elsewhere in the world, which have had the effect of starting to fix the financial regularity system. We obviously have the Dodd-Frank legislation in Washington — that’s still being worked through. One of our big aims is to achieve a fair degree of regularity convergence between the United States and Europe. But obviously, as the recent G20 meeting shows, there’s still some way to go to establishing a genuine international framework for dealing with the inbalances which exist in an international economics system. And that is going to require, I would guess, a number of further meetings and discussions. These things can’t happen overnight, but from the U.K. perspective, finding the correct global solutions to these issues is very, very important. And in our national interests as well.

Ryssdal: Nigel Sheinwald is the British ambassador to the United States. Mr. Ambassador, thanks so much for your time.

SHEINWALD: Thanks very much for having me.

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